Must Have a Legitimate Business Purpose for ILSA exemption

09/28/2011 10:35 AM |
Anonymous

New FLTA Member Paul Minoff reports:

In what could potentially have far-reaching implications to land developers in Florida (and outside as well), earlier this month, the 11th Circuit Court of Appeals ruled that developers who are seeking exemptions from the Interstate Land Sales Full Disclosure Act must provide a "legitimate business purpose" when structuring transactions in way to exempt them from the Act, and expressly holding that avoiding the requirements of the Act is NOT a legitimate business purpose.

In this case, the developer used two separate agreements to place the development project within two separate exemptions under the Act. The court reviewed the use of such agreements and ruled that the developer did not have a legitimate business purpose, resulting in a return of the purchaser's condo deposits. As anyone in the development world knows, this type of practice was and is very common so it behooves everyone representing clients in the industry (as well as escrow agents who are holding deposits) to closely review this opinion.

We can only hope that the string of bad recent decisions affecting the real estate and title industries will come to an end soon.